Director’s update: Globalised Economy

A new month a new Prime Minister but continuity in the international and trade space with both James Cleverly and Kemi Badenoch being retained in FCDO and DIT. The challenges facing the new government in stimulating growth and building resilience haven’t changed either.  Three immediate issues facing the new Prime Minister and his top team on the international space:

• How to conclude India FTA and CPTPP negotiations, particularly with well voiced differences on immigration and a combative Mexican government;
• With warmer sounds of progress in the last month, how to find a resolution to the Northern Ireland Protocol and rebuild EU ties in the face of Russian aggression; and
• Whether to continue a refreshed Integrated Review with a need to accelerate implementation in collaboration with the US and key allies.

CPTPP and the Mexico FTA

In September DIT’s Mexico and Canada FTA Chief Negotiator and I did a joint visit to Mexico City to support progress. This was the first time CBI and HMG have tried this approach and it certainly had impact. The existing FTA, worth £4.2bn bilaterally, was rolled over from the EU and written pre-iPhone so it doesn’t include many modern provisions, from services to IP.  With Mexico negotiating both bilaterally and as part of CPTPP, the scope for arbitrage is high and the Mexicans are pushing for a hard bargain, particularly around agriculture. The visit really highlighted the difficult operating environment, with President AMLO very protectionist and the military increasingly powerful within domestic institutions.

The hope from most members for a substantive UK-Mexico FTA was limited. The Mexican government departments are very siloed and if the deal is concluded it is likely the President will not sign it once it reaches his desk, (as is the case with the Mexico – Ecuador FTA). The realistic aim is to ensure continuity of current market access whilst agreeing future focussed provisions.  There are elections in two years which may bring a President who is more business friendly and welcoming of investment so there may be good reason to delay this FTA whilst pushing ahead with CPTPP.

The Integrated Review (IR) and Atlantic Future Forum

With the IR refresh ongoing in a backdrop of war in Ukraine and increasing China tensions, this years Atlantic Future Forum was an important moment. 200 of the great and the good from UK and US military, business and government came together on board the Queen Elizabeth aircraft carrier to reflect on lessons from the last 12 months and think ahead towards future challenges. I must say though, it slightly disappointed in the latter. The mainstage panels were largely reflections on the ongoing war and how future military postures need to be revised. Whilst there were aspects of how the world will change in the coming decades, and what we must do to secure influence and prosperity, the event did not do enough to integrate these questions into our future approach to security.

The Integrated Review team, led by John Bew at No10, have a very tight turn around so expect limited external engagement. We are feeding in directly and will run a couple of member sessions to garner views next week. If you’d like to join, please contact [email protected].